SEC Charges NVIDIA Corporation with Inadequate Disclosures about Impact of Cryptomining

Washing­ton D.C., May 6, 2022 — The Secu­ri­ties and Exchan­ge Com­mis­si­on today announ­ced sett­led char­ges against tech­no­lo­gy com­pa­ny NVIDIA Cor­po­ra­ti­on for ina­de­qua­te dis­clo­sures con­cer­ning the impact of cryp­to­mi­ning on the company’s gaming business.

The SEC’s order finds that, during con­se­cu­ti­ve quar­ters in NVIDIA’s fis­cal year 2018, the com­pa­ny fai­led to dis­c­lo­se that cryp­to­mi­ning was a signi­fi­cant ele­ment of its mate­ri­al reve­nue growth from the sale of its gra­phics pro­ces­sing units (GPUs) desi­gned and mar­ke­ted for gaming. Cryp­to­mi­ning is the pro­cess of obtai­ning cryp­to rewards in exchan­ge for veri­fy­ing cryp­to tran­sac­tions on dis­tri­bu­t­ed led­gers. As demand for and inte­rest in cryp­to rose in 2017, NVIDIA cus­to­mers incre­a­singly used its gaming GPUs for cryptomining.

In two of its Forms 10‑Q for its fis­cal year 2018, NVIDIA repor­ted mate­ri­al growth in reve­nue wit­hin its gaming busi­ness. NVIDIA had infor­ma­ti­on, howe­ver, that this incre­a­se in gaming sales was dri­ven in signi­fi­cant part by cryp­to­mi­ning. Des­pi­te this, NVIDIA did not dis­c­lo­se in its Forms 10‑Q, as it was requi­red to do, the­se signi­fi­cant ear­nings and cash flow fluc­tua­tions rela­ted to a vola­ti­le busi­ness for inves­tors to ascer­tain the likeli­hood that past per­for­mance was indi­ca­ti­ve of future per­for­mance. The SEC’s order also finds that NVIDIA’s omis­si­ons of mate­ri­al infor­ma­ti­on about the growth of its gaming busi­ness were mis­lea­ding given that NVIDIA did make state­ments about how other parts of the company’s busi­ness were dri­ven by demand for cryp­to, crea­ting the impres­si­on that the company’s gaming busi­ness was not signi­fi­cant­ly affec­ted by cryptomining.

NVIDIA’s dis­clo­sure fail­u­res depri­ved inves­tors of cri­ti­cal infor­ma­ti­on to eva­lua­te the company’s busi­ness in a key mar­ket,” said Kris­ti­na Litt­man, Chief of the SEC Enfor­ce­ment Division’s Cryp­to Assets and Cyber Unit. “All issu­ers, inclu­ding tho­se that pur­sue oppor­tu­nities invol­ving emer­ging tech­no­lo­gy, must ensu­re that their dis­clo­sures are time­ly, com­ple­te, and accurate.”

The SEC’s order finds that NVIDIA vio­la­ted Sec­tion 17(a)(2) and (3) of the Secu­ri­ties Act of 1933 and the dis­clo­sure pro­vi­si­ons of the Secu­ri­ties Exchan­ge Act of 1934. The order also finds that NVIDIA fai­led to main­tain ade­qua­te dis­clo­sure con­trols and pro­ce­du­res. Without admit­ting or deny­ing the SEC’s fin­dings, NVIDIA agreed to a cea­se-and-desist order and to pay a $5.5 mil­li­on penalty.

The SEC’s inves­ti­ga­ti­on was con­duc­ted by Brent Wil­ner of the Cryp­to Assets and Cyber Unit, and super­vi­sed by Dia­na Tani and Ms. Litt­man of the Cryp­to Assets and Cyber Unit.